CALIFORNIA'S ENERGY CRISIS: what a fantastic muddle. Bits versus atoms. Clicks versus bricks. It's very 2001 -- all about the New Economy getting hauled from its Volvo and curbstomped by the Old Economy. California's problem is that energy is not bits. You can't burn bits to keep warm. A natural gas pipeline is not the Internet Cloud. There are networks, and then there are networks. This is what comes of trustingly treating a rusty gas pipeline like the warm and kindly Internet.
California runs on natural gas pipes, not fiber optics. On the Internet, you can produce all the bits you want and shuffle them around at the speed of light -- sort of. But natural gas isn't bits and it doesn't get "produced." It gets extracted out of big dirty holes in the ground, and then shipped in big glugging rusty pipes. That's the story.
The "free market" doesn't even enter into this discussion.  OPEC is a cartel. OPEC is 105% market friction; market friction is why they exist. The fossil-fuel business is the Old Economy at its most primeval and piratical. It's not run by dot-com guys in moleskin slacks and polo shirts. It's run by genocidal warlords in berets.
Which is not to say that this crisis is lucid, clear, and simple. On the contrary, this is California in one of its bad karma moments: a seriously weird scene. Steve Peace, the state senator who authored California's 1996 deregulation bill, is also the guy who produced the daffy sci-fi parody, Attack of the Killer Tomatoes!  While the governor, Gray Davis, was trying to patch the crisis together, a suicidal lunatic tried to assassinate him.  This maniac drove an eighteen-wheeler milk truck straight up the steps of the State Capitol at seventy miles an hour. So while the State Assembly passes its emergency bailouts, California's Capitol is cracked, patched, and stinking of charred flesh and gasoline.
But those are mere tinsel threads in that glamorous cultural tapestry that once gave us Reagan and Sonny Bono.  For a deeper understanding, a situation this severe requires a list. Here's what has gone wrong in California, in more or less direct order of crisis-hood. Some of these things may be dealt with in a big hurry, given political genius and generous bankers. Others are going to hang on for years.
1. California's utilities are practically bankrupt. The reform required them to sell voltage at fixed prices while they bought fuel at market spot prices. This goofy market worked out kind of okay in '97, '98, and '99, more or less like the NASDAQ; but it went totally nuts in 2000. California's utilities have lost billions and billions. They owe it to people who (a) aren't Californian and (b) aren't kidding about collecting that debt.
2. California's spot market is a botch. If any player refuses to sell gas, even for a little while, then prices explode. In today's tight market conditions, nobody has to sell California any gas. This means that gas suppliers can game the state's gas market like big-oil cats double-clicking a digital mouse.
It's even worse at the moment, because nobody wants to sell to bankrupt utilities. Californians do have fuel now, but only because the feds are forcing people to sell it to them, with emergency orders.
3.  In California's dreamlike utility business, marketers are supposed to be cleanly divorced from generators. Electricity marketers are supposed to compete on price, service, and flashy logos, just like dot-coms, while the electricity generators stay in their obscure, Old Economy coalmines, sort of like mythical tommyknockers.  But clean, sizzly voltage can't be separated from that dirty, stinky fuel.
This naïve practice meant unilateral disarmament. California's generators got bought up by "pirate generators" from out of state. Now these fuel moguls have got the state totally over a barrel, OPEC-style. Nobody knows how to make them give those generators back, either. They ain't gonna. They bought that hardware legally, and at this point, anybody with a generator can turn California on and off at will.
4. There's no clear direction for reform. Since the deregulation bill passed unanimously, no politician gets to be the white knight. California's shattered utilities have nobody to blame but themselves. It's not like angry populist consumers chased them into this mess. Oh, no: Instead, they lavishly greased the palms of the State Assembly, got a friendly bill passed, and now they're getting clobbered by their own script. Normal people hate them and want to see them die.


5. California's got a severe case of NIMBYosis. The state's power system is neglected and decrepit. Californians fear power plants on principle; they loathe them so much that they don't even want to replace their old, filthy power plants with new power plants that work better and are sort of okay. Case in point: Cisco moved heaven and earth to make sure there was no ugly power plant near their sparkly new headquarters -- even though Cisco's main products, Internet routers, suck voltage like steel mills.
6. California has had a big boom, a second gold rush. The population is thriving and living large. So there really, truly are genuine power shortages in California. The shrimpy transmission towers just can't supply half a million eager new consumers every year.
7. It's hard work building fossil-fuel plants. That's not plug-and-play hardware. We're talking years of big dirty bulldozers and hard hats. Oh, and power plants look ugly, they smell, they lower real-estate values, and sometimes they blow up.
8. There aren't enough gas pipelines, either.  California's sucking its gas through long, rusty soda straws. If even one pipeline shuts down somewhere in distant New Mexico, gas prices in California go nuts. Now try to imagine routing hundreds of miles of those babies through the high-rent districts in Marin, Beverly Hills, and Silicon Valley.
9. California's neighbors are losing patience. They've got their own power problems and are tired of underwriting California with their voltage. Five governors of neighboring states just wrote Governor Davis telling him to quit whining and just build more power plants.  The feds feel much the same way. The Northeast may brown out pretty soon, but so far, California is finding a distinct lack of solidarity. "But our fabulous economy will tank and everyone will go to work in other states." Yeah, so?
10. Everybody's trying to spin the crisis. President Bush just couldn't resist the urge to give the back of his hand to enviros.  Particularly egregious: Sinister coal-company operatives who loudly claim you can't run the Internet without coal trucks. The Internet uses energy all right, but its demand is zilch compared to air conditioning. Utility demand is all about weather. As for coal, it's actively poisonous.
11. It's a cold winter. Gas is in stiff demand this year.  Worse for California, it's a dry winter in the Pacific Northwest. Normally there's a lot of cheap, clean energy running through hydroelectric dams in the winter. It's just not there for California this year.  It's sorely missed.
12. This is the weird one. It may be cold now, but it was 109 degrees in northern California this summer. It's not supposed to get that hot in San Francisco, ever.  Climate change is a genuinely new, freaky area for utilities. This is a winter blackout, but in winter, California can cruise by on a mere 33,000 megawatts. Summers require a whopping 47,000 megawatts, and summers with crazy greenhouse heat spikes are off the scale. Energy networks just plain break when you run heavy loads in crazy heat. Right now, California has 10,000 megawatts of its capacity up for repair.
13. This is unlucky 13, the grand finale. Californians feel lambasted, defrauded, and bamboozled by Old Economy "pirate generators" such as (let's name names here) Reliant Energy, El Paso Energy, Dynegy, Duke Energy, AES, Southern, Calpine, and Enron. But Enron in particular is George W. Bush's favorite company in the whole wide world. James W. Baker is Enron's lawyer. The Pirate Generators own Washington. The Information Superhighway is suddenly yesterday's news, somebody else's concept, all hype and ozone. The NASDAQ is in the tank, while the utility sector is the new darling of Wall Street. Furthermore, it very much galls the new administration that the homeland of Reagan is currently run by Democrats. An economic crunch in California is the prelude to a political assault from Washington.
On the plus side, Californians have themselves convinced that they are amazingly inventive, clever, and technically skilled. It's pretty easy to do that sort of thing in a rain of cash under Hollywood stage lights. Doing it in the dark in a recession is a dead-serious test of mettle. Let's be clear about one thing here. The Old Economy energy network is not anybody's friend.  It's a ruinous, destructive cartel spewing greenhouse gas, an ugly blight that's slowly roasting the planet and California in particular. Bright-eyed Californians have foolishly handed over control of their vital energy network. But California also generates twelve percent renewable energy, more clean, green energy than any other state in the Union.
It's said that "gold rushes finish ugly." But California has finished off a couple of world-class gold rushes, while somehow remaining glorious California. So far, anyhow.
Good luck, Golden State.

Bruce Sterling 's latest novel is Zeitgeist. His Web site is Viridian.

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